The Hindu Business Line : Decision on tax relief for aviation fuel next week

New Delhi, June 16 A final decision on providing sales tax relief on aviation turbine fuel (ATF) to domestic airlines is likely to emerge only after the June 21-23 meeting of the Empowered Committee of the State Finance Ministers on Value Added Tax in Srinagar.

Briefing newspersons after a meeting here on Monday, the Committee Chairman, Dr Asim Dasgupta, said the Ministry of Civil Aviation has been asked to provide more details on how ATF price is fixed around the country and what options are available for the Committee to consider on this matter.

The high domestic cost of ATF, which accounts for 45-50 per cent of the operating costs of most airlines, is being cited as one of the major reasons for the industry reporting a loss of Rs 4,000 crore during the year. At the moment the sales tax on ATF varies from 30 per cent in Gujarat to Tamil Nadu (29 per cent), Madhya Pradesh (28.75 per cent) and Andhra Pradesh (4 per cent).

The States were also yet to receive any communication from the Centre on placing ATF under ‘declared goods’ category which would attract a uniform sales tax of 4 per cent through out the country.

Meanwhile, Kerala has decided against lowering the sales tax on ATF to 4 per cent, which was proposed in the State Budget 2008-09. “The State planned to lower the sales tax on the condition that airlines lower their fares. This has not happened so we will review the decision to lower sales tax rate. No decision has yet been taken on what level sales tax on ATF should be raised to, but Kerala will go with whatever is the floor rate that is decided by the Empowered Committee of State Finance Ministers,” said the State Finance Minister, Mr T.M. Thomas Isaac.

On March 7, while presenting the State Budget 2008-09, Mr Isaac had proposed lowering sales tax on ATF to 4 per cent from the existing 28.75 per cent. The lowering of the sales tax has not yet been implemented as the Budget is yet to be passed.